Consumer Profile – Republic of South Korea

Key demographic indicators

South Korea's population was approximately 51.8 million people in 2021, and is set to remain virtually flat until 2028, where it is expected to peak at 51.9 million. It is expected to fall to 50.9 million by 2040, increasing at a compound annual growth rate (CAGR) of −0.16% from 2028-2040. Approximately four-fifths (81%) of South Koreans were living in urban areas, while one-fifth (19%) were living in rural areas in 2021. South Korea's retail market is heavily concentrated in the city of Seoul and its metropolitan area, which account for roughly 70% of all retail sales in South Korea.

In 2021, the male-to-female ratio was split almost perfectly, with around a 1.002:0.998 ratio, with slightly more males (25.97 million) than females (25.85 million). The median age in South Korea for males was 42.9, while the median age for females was 45.8. By 2030, the median age of the total population is expected to increase to 49.6 growing at a CAGR of 1.4% from 2005 to 2030.

From 2005 to 2030, the number of people in the 0-14 age group is expected to continue to drop by a CAGR of −2.5%. Meanwhile the age group from 15-64 is set to begin a decline, falling by a CAGR of −0.1% from 2020 to 2030. Meanwhile, the population aged 65+ is set to increase rapidly from 2005-2030 by a CAGR of 4.5%.

South Korea's vital statistics

The fertility rate in South Korea was 0.85 births per woman in 2021, equivalent to 5.2 children born per thousand South Koreans. South Korea's fertility rate is currently the lowest in the world, however it is expected to slightly recover to 1.1 births per woman by 2030, exactly where it was in 2005.

Household structure in South Korea

As South Korea demographic aging continues, it is forecasted that households without children will account for 77.1% of all South Korean households by 2030. Single person households have recently become the largest type of household, growing at a CAGR of 3.9% between 2005 and 2030. Households with one child are exhibiting a steady decline growing at CAGR of −2.5%, from 2005-2030, while by 2030 households with 2 or more children will collectively account for less than 5% of all South Korean households.

Business environment and economic indicators

In 2020, South Korea was the fourteenth largest economy in the world at purchasing power parity. Despite already boasting a well-developed economy, South Korea has experienced strong and sustained economic growth in the years since the Asian Financial Crisis. This growth is expected to continue, with South Korean GDP growing by a CAGR of 4.3% from 2005-2030. A stagnant or declining working age population means these gains are attributable almost entirely to gains in worker productivity. The country experienced a relatively modest economic shock due to the coronavirus pandemic and has since rebounded. Ongoing trade disputes with Japan and between the United States (U.S.) and China have also impacted South South Korea's economy negatively.

South Korea has a very well-educated population, with nearly a third of all South Koreans aged 15+ having completed some form of higher education as of 2020 (31%). According to the Organisation for Economic Co-operation and Development (OECD), among young South Koreans, this rate is far higher, with 70% of South Koreans aged 25-34 having attained some form of tertiary education as of 2018.^{Footnote 1} This is the highest rate of any OECD country. Over a third of South Koreans graduates of tertiary education did so with a major in a science, technology, engineering, or mathematics (STEM) field.

In 2020, 51.4% of those with jobs worked in services, while mining, manufacturing and utilities accounted for 17.3% of employment. 8.0% worked in construction, 7.5% in health and social work, 7.0% in education, 5.3% in agriculture, hunting, forestry, and fishing, while 3.4% worked in public administration.

Food and beverage expenditures and preferences

South South Korea has a large consumer market, totalling US$784.4 billion in 2021, making it the fourth largest consumer market in Asia (behind China, Japan, and India). In 2021, total consumer expenditure per capita was US$15,136, out of which 11.3% was spent on food and 1.8% was spent on both alcoholic drinks and non-alcoholic beverages. In comparison, disposable income per capita for men was US$23,267.7, while for women it was US$14,464.3.

Consumer expenditure per capita is expected to grow by a CAGR of 3.2% from 2022 to 2026 and was said to represent 43.6% of GDP in 2021. In the period from 2020-2040, consumer spending on health and medical services is expected to see the strongest growth, as the population continues to age.

Consumer expenditure on packaged foods is exhibiting increased growth due to the Covid-19 pandemic and increasing time spent at home. Nevertheless, growth in the retail value of packaged food sales is expected to be relatively modest. The market was valued at US$27.4 billion in 2020 and is expected to grow to US$28.7 billion by 2025, experiencing a CAGR of 0.9% from 2020-2025. The pandemic has also stimulated very strong growth for the ecommerce food sector and for meal kits. 64% of South South Koreans reported cooking or baking at home at least weekly, and 47% reported consumption of a ready-made meal. Ready made meals were more popular with those who live alone. In 2020, e-commerce was expected to eclipse store-based retailers for the sale of fast-moving consumer-goods (FMCG). E-commerce has seen its market share in the distribution of packaged foods grow from 9.7% in 2015 to 17.3% in 2020. Continued strong growth in e-commerce is expected. Consumers have been overall pivoting away from brick-and-mortar retail locations, however retailers located in residential areas have seen gains.

The pandemic has also resulted in increased attention towards the health of South Koreans diets. Consequently, there is increasing demand for healthy meals that can be enjoyed at home. 36% of consumers reported closely leading nutritional labels, while 46% reported selecting foods based on their health. Low sugar and low-calorie beverages have seen strong growth. Coffee is a popular non-alcoholic beverage with total retail sales in 2021 valued at US$2.1billion, with those of tea valued at US$0.21 billion. South Korean consumers average 353 cups of coffee a year, which is above the global average. Retail value of coffee sold annually is expected to grow at a CAGR of 2.2% from 2021-2026. Fresh coffee is expected to see strong growth, while instant coffee is set to experience a decline. Rising demand for coffee is driven in part by the rising popularity of making coffee at home. Soft drinks are expected to experience solid growth. Volume of soft drinks sold is expected to grow at a CAGR of 6.0% from 2021-2026, with emphasis on low calorie and low sugar options. Juice sales are expected to experience negative sales growth. The volume sold, measured in litres, is expected to experience a CAGR of −2.6% from 2021-2026.

South Korea has a strong drinking culture along, and South Koreans consume alcohol at some of the highest rates in the world. Volume of alcoholic drinks consumed is expected to grow at a CAGR of 1.4% from 2021-2026. Retail value is expected to grow at a CAGR of 3.0% from 2022-2026. Domestic lager is the most popular item, and the alcohol market is experiencing a shift away from social drinking to drinking at home. Beer is expected to benefit from shifts in consumer demand that favour healthier options with a lower alcohol content. However, the retail values wine and spirits are both also set to experience similarly fast growth. As consumer focus shifts towards drinking at home, consumers of wine increasingly value competitive pricing.

Consumer trends and opportunities

Solid growth in consumer spending

South Korea is a net importer of food and agri-food products, importing US$27.9 billion in 2016, triple what it exported. In 2016, Canada exported Can$723 million to South Korea, equating to a 2% market share. From 2010 to 2012 Canada's top average annual exports to South Korea were wheat, at Can$273.6 million, and pork at Can$ 133.0 million. Agri-food exports to South Korea were largely dominated by the United States, China, and Australia, who in 2016 had 24%, 14%, and 9% market shares, respectively. South Korea has a highly digitized economy, and e-commerce is extremely important in the South Korean market.

Food made up 11.3% of South Korean consumer spending in 2021, and South Korean consumer spending is set to grow steadily over the coming years. Western, Japanese, and Chinese style foods are becoming increasingly popular. Grains and oilseeds, such as wheat, rye, oats, barley, barley malt, flaxseed, canola, and soybeans, are increasingly popular. Opportunities also exist for the export of mustard seed and lentils. Protein is also rising in popularity, with meat sales expected to grow at a CAGR of 6.8% from 2021 to 2026. Opportunities exist for Canadian products such as beef, pork, animal fat, hides and skin and tallow.

Other foods that offer strong opportunities for Canadian exporters include processed food products such as frozen French fries, canola oil, maple syrup, skim milk preparations, and mozzarella cheese. Fish and seafood, animal feed, pet food, furskins, functional food and natural health products also offer strong opportunities. Sales of pet food in South Korea grew at a CAGR of 11% from 2016 to 2021. Growth of dog food are expected to slow to a CAGR of 3.3%, but cat food sales are expected to grow at a CAGR of 12.4% from 2022 to 2026.

The South Korean market has been trading towards premiumization, as incomes continue to rise, and the volume of products consumed does not keep pace. 30% of South Korean consumers say they want to buy fewer, higher quality items. This trend can be seen in markets such as the coffee and pet food markets.

According to surveys, Dinner is the most popular meal of the day, closely followed by lunch. Breakfast follows at a distant third and is particularly unimportant on weekends. Snacking has increased in popularity due to the pandemic, and on weekends afternoon and evening snacks are more common than eating breakfast. Snacking is significantly more popular among younger age groups than among baby boomers.

Rise of convenience foods

The pandemic has caused many South Koreans to spend more time at home. As at-home cooking became more popular, frozen, and packaged foods and ready-made meals, and other convenience foods, have seen strong growth. The growth in ready-made-meals is not expected to reverse following the end of the pandemic, as consumers have become used to these items, and South Koreans generally work relatively long hours, increasing the need for convenience. 49% of South Korean consumers say they are willing to spend money to save time, including over 60% of millennials.

Moreover, convenience foods are especially popular among those who live alone. Single-person households are already the most common type in South Korea, and they are expected to exhibit strong growth in the coming years. Ready-made-meals are popular among those who do not have children, another quickly growing demographic. This is expected to further drive growth in the demand for convenience foods.

According to Euromonitor, staple foods that are expected to see strong growth include "convenient forms of bread, breakfast cereals, processed meat, seafood and alternatives to meat, processed fruit and vegetables and rice, pasta and noodles."^{Footnote 2} Baked goods are expected to see strong growth, growing at a CAGR of 3.0% from 2021 to 2026.

Health, sustainability, and protein

South Korean consumers are increasingly interested in the health effects of their diets, and many are willing to pay a premium for foods perceived as being healthier. South Korean consumers place emphasis on food safety, valuing clear labelling that demonstrates the origin and safety of the product. Interest in health is driven in part by a rapidly ageing population. Health and wellness sales enjoyed a 4.3% CAGR from 2016-2021. Moreover, long periods of time spent indoors during the pandemic, and the accompanying reduction in physical activity, have brought calorie control and weight-management to the fore. Although obesity rates in South Korea remain relatively low, 46% of South Koreans gained over 3kg during the pandemic.

Reduced sugar and low-calorie options are becoming increasingly popular. Better for you packaged foods recoded strong growth in 2020 and 2021, including reduced calorie and reduced fat foods. Better for you reduced salt packaged food in general saw particularly strong growth, growing at a CAGR of 9.8% in 2020 and 2021. Grain based and low-carb meal replacements, as well as supplement nutrition drinks are a quickly expanding market, popular among older consumers.

In addition to low calorie, low fat, or low salt options, which have traditionally been dominant in the better for you market, South Koreans are becoming increasingly interested in the nutritional content of their food, and the nutrients it provides. Nevertheless, most South Korean consumers remain unwilling to compromise on taste.

South Koreans are becoming increasingly conscious of issues concerning sustainability and ethics, and this is affecting their consumption habits. 66% of South Koreans say they are worried about climate change, while 63% wish to make an environmental difference through their everyday actions. South Koreans are generally concerned with purchasing products that reduce plastic use. The soft drink market, for example, is set to grow at a CAGR of 6.0% from 2021 to 2026, and is increasingly trending towards reduced packaging, as well as the emergence of low sugar options.

Meanwhile, organic products are rapidly gaining popularity. Sales of organic packaged foods grew at a CAGR of 9.1% from 2016 to 2021. Growth is expected to slow but remain strong, with sales of organic packaged foods growing at a CAGR of 4.1% from 2021 to 2026. Naturally healthy packaged saw a CAGR of 6.2% from 2016 to 2021, while fortified/functional packaged food saw sales contract, growing at a CAGR of −1.5% over the same period.

Finally, protein is also rapidly gaining popularity in South Korea. South Koreans generally perceive chicken as being a healthy source of protein. Consequently, poultry products are currently a driving force behind the impressive growth of sales of meat products. Beef and veal are also expected to see strong growth. This growth comes at a time when South Korean consumers already spend more on meat than any other category of food. Products that are certified "animal welfare" and "antibiotic-free" are gaining traction. Reduced salt shelf stable meat saw the fastest growth of all. For example, ham, which had traditionally been viewed as unhealthy, is gaining traction as reduced sodium versions enter the market. Shelf stable meat, seafood, and frozen vegetables grew at a CAGR of 9.5% from 2019-2021, although growth is expected to slow to a CAGR of 3.4% from 2021 to 2026.

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• Pork: US$2,902.0 million (53%)
• Beef and veal: US$1620.8 million (30%)
• Poultry: US$898.9 million (16%)
• Lamb, mutton, and goat: US$38.9 million (1%)
• Other meat: US$25.5 million (0%)

Source: Euromonitor International, 2021

Opportunities for Canada

On the first of January 2015, the Canada-South Korea Free Trade Agreement (CKTFA), a bilateral trade agreement that presents significant opportunities for Canadian producers and exporters. As of that date, 98.5% of Canada's exports have been eligible for duty-free access to Korea. Tariffs are to be further reduced on the first of January of ever year until the deal reaches full implementation in 2032, by which time tariffs will have been eliminated on 99.75% of Canadian exports.

The agreement reduced tariffs on a variety of agricultural sectors, including beef and pork. Tariffs on beef fat and tallow, live cattle, and bovine embryos have been full eliminated. Tariffs on pork fats and oils, swine embryos, pure bread live swine, processed and prepared pork, as well as pork offal have been fully eliminated. Tariffs on fresh, chilled, and frozen pork cuts are expected to be removed in 2027. Both Canadian beef and pork had been losing market share, as South Korea concluded free trade agreements with other nations. The agreement eliminated tariffs on processed foods such as maple syrup, sugar confectionary, and chocolate. Duties on wheat, rye, whiskey, beer, wine, and icewine have been eliminated, along with furskins. 70 percent of South Korean tariffs on Canadian fish and seafood have been removed as of 2021, and all remaining seafood tariffs are to be removed by 2027. Tariffs set to expire in 2024 include soybeans, frozen shrimp, frozen snow crab, and vodka.

For more information on what the CKFTA will mean for Canada's agriculture and agri-food sector visit the CKFTA for Agri-Food Exporters page. Further information on the state of Canadian market access to South Korea can be found through the Canada Tariff Finder.

South Korea is also in the process of applying to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which Canada has already signed, along with Mexico, Australia, Brunei, Chile, Japan, Malaysia, New Zealand, Peru, Singapore, and Vietnam.

Conclusion

The South Korean agri-food market is experiencing solid growth, presenting opportunities for Canadian exporters. In the retail sector, there are opportunities for in Health and Wellness products, ready to eat or ready to cook convenient packaged foods, and ready-made meals. E-commerce is growing and increasingly essential component of doing business in South Korea.

The South Korean market is characterized by brand loyalty consciousness of food safety. South Korean consumers tend to prefer established brands and locally produced products. However, opportunities exist for Canadian producers that can clearly label the origins of their products and how they meat the expectations of South Korean consumers for food safety. This is particularly important for seafood products, as South Korean consumers are often wary of seafood imports that may have been contaminated by the Fukushima Daiichi nuclear disaster. Canadian exporters should focus on building brand loyalty, while playing into Canada's image as county with a clean environment and abundant natural resources.^{Footnote 3}

For more information

The Canadian Trade Commissioner Service:

International Trade Commissioners can provide Canadian industry with on-the-ground expertise regarding market potential, current conditions and local business contacts, and are an excellent point of contact for export advice.

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For additional information on Seoul Food 2022 please contact:

Ben Berry, Deputy Director
Trade Show Strategy and Delivery
Agriculture and agri-food Canada
ben.berry@agr.gc.ca

Resources

• Agriculture and Agri-Food Canada. CKFTA for Agri-Food Exporters, modified May 2021.
• BC Ministry of Agriculture. Market Guide For B.C. Agrifood And Seafood Exporters, May 2017.
• Canada Trade Commissioner Service: The Canada-South Korea Free Trade Agreement: Benefits and Opportunities for the Canadian Agricultural and Agri-food Sector, modified May 2021.
• Euromonitor International. Alcoholic Drinks in South Korea, May 2021.
• Euromonitor International. Better For You Packaged Food in South Korea, January 2022.
• Euromonitor International. Coffee in South Korea, January 2022.
• Euromonitor International. Consumer Lifestyles in South Korea, June 2021.
• Euromonitor International. Economy, Finance and Trade: South Korea, March 2021.
• Euromonitor International. Juice in South Korea, December 2021.
• Euromonitor International. Megatrends in South Korea, September 2021.
• Euromonitor International. Packaged Food in South Korea, December 2020.
• Euromonitor International. Retailing in South Korea,February 2021.
• Euromonitor International. Soft Drinks in South Korea, December 2021.
• Euromonitor International. Staple Foods in South Korea, December 2021.
• Euromonitor International. Sustainability: South Korea, September 2021.
• Euromonitor International. Tea in South Korea, January 2022.
• Euromonitor International. Weight Management and Wellbeing in South Korea, October 2021.
• Global Affairs Canada. Canada-South Korea Free Trade Agreement (CKFTA), modified May 2016.
• Tariff preferences for Canadian exports to South Korea, modified December 2021.
• Organisation for Economic Co-operation and Development: Education at a Glance: South Korea, 2019.

Consumer Profile – Republic of South Korea
Global Analysis Report

Prepared by: Brendan Dwyer, Student (Co-op)

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